While there are important positive features of S. 903 that the
Administration supports, there are also major provisions that the
Administration strongly opposes. Significant changes to these provisions
will be needed in order to reach agreement on this legislation.

The Administration is supportive of the overall approach on United Nations
(UN) reform and arrears taken in Division C of this bill, welcomes the
inclusion of most of the State Department authorities sought by the
Administration, and wishes to work with the Congress to improve the
generally positive authorized funding levels in this bill. However, the
Administration strongly opposes provisions related to reorganization of the
foreign affairs agencies, and certain foreign policy-related provisions are
of serious concern.

Foreign Affairs Reorganization

The President, the Secretary of State and the heads of the relevant
agencies are committed to the reorganization, consolidation and reinvention
of the foreign affairs agencies as announced by the President on April 18,
1997. Internal deliberations are underway to develop a detailed
reorganization plan, consistent with the President's decision,
implementation of which will require action by the Congress. The
Administration, therefore, would support legislation that provides the
President with maximum flexibility and does not prejudge the outcome of
these internal deliberations. The Administration, however, strongly
opposes legislation which would mandate or micromanage the details of how
to implement such a complex reorganization, including detailed provisions
related to international broadcasting activities. Such directives would be
incompatible with the flexibility needed by the President to reorganize the
foreign affairs agencies to meet the challenges of the 21st century.

S. 903 should permit bipartisan movement towards the common goal of
reorganizing and reinventing the State Department, ACDA, U.S. Information
Agency (USIA), and the Agency for International Development (AID). The
Administration has shared language with the Committee, which provides a
workable approach to reorganization. Alternatively, the Administration
also supports the reorganization provisions contained in H.R. 1757, the
Foreign Relations Authorization Act, as passed by the House of
Representatives on June 11.

Unfortunately, S. 903 goes well beyond, and in some instances, is
inconsistent with the President's decision on reorganization. Therefore,
the Administration urges the Senate to adopt either the Administration's
alternative or an approach similar to that passed by the House and will
work with the Congress to this end as the legislative process continues.

UN Reform and Arrears

The Administration is supportive of the overall approach taken in Division
C of this bill, which authorizes an interrelated package of reforms and
arrearage payments to the United Nations and other international
organizations. While the Administration has concerns with certain
provisions of the United Nations Reform Act, the approach represents a
major step forward. The Administration will continue to work with the
Congress throughout the legislative process to address its concerns.

Foreign Relations Appropriation Authorizations

The Administration is concerned that the appropriation authorization levels
in S. 903 for some programs are lower than provided for in the House-passed
Foreign Relations Authorization bill, which is consistent with Bipartisan
Budget Agreement. Of particular concern is a reduction to State Department
operating accounts of $140 million from the Administration's request,
because the Machine Readable Visa (MRV) program has not been reauthorized.
If MRV fee language cannot be worked out, an additional $140 million should
be authorized as an appropriation to the State Department, consistent with
the Budget Agreement. Without the funding provided through MRV fees, the
Department's ability to protect American's borders, provide consular
services to American citizens throughout the world, conduct diplomacy, and
continue to move forward on management reforms would be seriously impaired.

In addition, the appropriation authorization for annual assessed
contributions to international organizations (CIO) is $59 million less than
the President's request. Moreover, the President's request for
peacekeeping is reduced by $40 million. Full authorization for these
accounts is essential to avoid the reemergence of arrears and so that
important foreign policy priorities and unexpected crises in areas of vital
importance to U.S. interests can be addressed.

The Administration strongly opposes the reduction in ACDA's appropriation
authorization from $46 million to $39 million. Since ACDA and State will
be integrated by the end of fiscal year 1998, ACDA will need full funding
in FY 1998 in order to successfully restructure while continuing to
accomplish all of its national security and arms control missions. ACDA's
ability to effectively implement the President's arms control priorities,
such as the Nuclear Non-Proliferation Treaty, must not be impacted
adversely by such a reduction in funding. For USIA, the Administration
appreciates the support shown for public diplomacy programs in S. 903, but
opposes reductions in the operating resources needed to support these
programs. For both ACDA and USIA, it is imperative that the appropriation
authorization reductions be restored.

Foreign Policy Restrictions: Certain foreign policy-related
provisions in S. 903 are of concern and need to be deleted or changed as
the legislative process continues. The attachment contains examples of
policy provisions of concern to the Administration.

The Administration is continuing to review S. 903 and may seek further
changes to the bill as the legislative process continues.

Pay-As-You-Go Scoring

S. 903 could increase direct spending; therefore, it is subject to the
pay-as-you-go requirement of the Omnibus Budget Reconciliation Act (OBRA)
of 1990. OMB's preliminary scoring estimate is that the PAYGO effect of
this bill is zero. Final scoring of this legislation may deviate from this
estimate.